Welcome to The Denali Group presentation of: Stop Sabotaging Your Procurement Transforming Efforts 5 Mistakes to Avoid

Welcome to The Denali Group presentation of:

Stop Sabotaging Your Procurement Transforming Efforts – 5 Mistakes to Avoid

Since 1991, the Sourcing Interests Group (SIG) has provided forums for networking, relationship building, knowledge sharing and

education in a non-commercial environment.

SIG, a recognized industry-leading, membership-based

organization, helps members to achieve improved business results, sooner, at a lower cost and with reduced risk across the

spectrum of outsourcing, offshoring, insourcing, procurement and shared services. SIG members are from both the user and provider communities drawn from Forbes 1000 and Fortune 500 companies.

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(11:00 am Pacific)

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February 14, 2012

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SIG’s Regional Roundtables provide education and local networking for members and invited

PRE-SUMMIT

• Executive Roundtables for Sourcing/ Procurement, Outsourcing & Legal • 12 Advanced Workshops

SUMMIT

• 4 General Sessions • 5 Focused Tracks • 38 Breakout Sessions

• 2 Speed Networking Sessions • 3 Special Evening Events • Free Spouse Program

SUMMIT KEYNOTES

Susan Schwab, Former U.S. Trade Ambassador on Global Trade, Policy and Politics

Colonel Bernard Banks, West Point’s Deputy Department Head, Behavioral Sciences &

• Tackling the Bottlenecks in Your Enterprise:

Optimizing Technology, Processes and Results

• Procurement’s Business Imperative: What

Got Us Here, Won’t Get Us There

• How Proctor & Gamble is Using Innovative

Approaches to Dispute Resolution

• Debate: Outsourcing is Finished vs. Outsourcing is the Future

• Procurement Outsourcing Journey: Moving

from One Partner to Another – Transition and

Implementation

• Launching an Enterprise Vendor Governance Office – Prudential's Journey

• What's All the Fuss About Data Security and

Privacy Risks? A Practical Approach to

Explain the Legalese

• When Deals Go Wrong – Part II: A Hands-On

Workshop on Diagnosing and Remediating Troubled Outsourcing Relationships

Stop Sabotaging Your Procurement Transformation

Efforts – 5 Mistakes to Avoid

7 Denali Group Presenters

John Evans Conrad Snover

Managing Partner Partner

Denali Group Denali Group

8

About Denali Group Expanding Procurement’s Value _{for The Global 1000 Since 1996}

3 year growth rate: 237%

Innovative

Fast and Efficient

9 Agenda

 Understanding Procurement Transformation

 Five Common Mistakes

 Strategies for Avoiding Failure

 Wrap-Up

10

Procurement Transformation Defined

Procurement Transformation: A holistic approach to improving all aspects of a procurement operation for improved results and long term sustainability

What it is:





value



What it isn’t:

✘

✘

11 Polling Question #1

How would you rate your organization’s Procurement

Transformation efforts?

A. Very successful, flawless – no significant issues, great results

B. Successful, but some lessons learned and stumbling points along the way

C. Mixed results – didn’t realized the benefits expected, but got some results

D. Disaster – would not recommend

12

Five Common Mistakes of Procurement Transformation

Not having a clear vision

Thinking that it’s just about sourcing

Thinking that it’s just about savings

Trying to transform everything

Forgetting the soft side

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2

3

4

5

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Don’t embark without a clear vision

Corporate Level Operational Level Department Levels Portfolio/Supplier/Individual Level Supply Chain A B C A A A A A A A A A A

Sourcing Logistics A/P

 Before you start, clearly articulate what Procurement Transformation success looks like

 Be descriptive, measureable and specific

 This isn’t about slick vision statements, but about understanding clearly what your desired outcomes will look like

 Ensure solid linkage from corporate visions, goals & objectives, down to the individual level Clear linkage of vision & objectives at all levels

1

14

Typical Procurement Transformation Objectives & Deliverables

Most Procurement Transformation programs have two primary objectives:

Bottom Line Financial Results

Realized hard dollar savings, with a strong focus on external spend cost reduction

• Immediate savings from In-Flight

Negotiations

• Quick wins on target categories

• Mid to long-term Wins from Strategic

Sourcing of prioritized categories

Metrics designed and implemented to track cost, quality & service performance of new sourced agreements

Sustainable Procurement Excellence

A new procurement “blueprint” design that will position the procurement organization for continued results beyond the cost reduction initiatives

Transfer of knowledge, skills and intellectual property to ensure that the right organizational resources, skills, tools and external partners are in place for long term sustainability

15 It’s more than just “sourcing”

Effective Procurement Transformation requires attention to a holistic suite of dimensions

16 It’s not just about savings

 Think about the ideal end-state, in terms of overall goals and objectives

 Think broadly – efficiency AND

effectiveness, cost AND quality AND service levels

 Develop your ideal “dashboard” of the future, with metrics and targets that you’d like to achieve in 3 months, 6 months, 1, 3 and 5 years out

 Use this to guide your transformation efforts – what changes will you need to make to enable your organization to achieve the range of targets?

Sample Procurement Dashboard

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Don’t try to transform everything

 Understand your current performance along the Procurement Transformation dimensions

 Identify areas with the largest gaps, and target those first

 Be realistic about your capacity for transformation activities; match your capacity against the highest priority initiatives

 Establish a realistic transformation roadmap

4

18 Don’t forget the “soft side”

 Be as collaborative as possible

 Involve as much of the organization as possible

• Include the organization & stakeholders in the up-front design of the procurement transformation effort, as well as in the implementation phases

 Understand your current talent landscape, and have a plan to acquire, develop, motivate & retain key people

 Develop a formal change management & communication plan for the transformation efforts; designate specific change leaders

 Emphasize employee performance management  Invest in people development

 Identify & reward high-performing employees  Have a succession plan to manage top talent

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Building the infrastructure to create an effective team

• Category SMEs • Sourcing Project experience • Sourcing Best Practice Database • Market Intelligence Category Knowledge • Sourcing Methodology • Job aids and

templates • Supply Market Analysis • Spend Analysis Process Knowledge • Business Specific Tools • Project Tracking & Reporting • Esourcing Tools Technology Knowledge • Sourcing Training curriculum • Skills Certification • Knowledge management System Training & Knowledge Mgmt

The following four elements are essential to delivering strong sourcing capabilities

20 Polling Question #2

If you’ve been involved in Procurement Transformation, which of these would you most want to change (in hindsight)?

A. More clearly articulating the vision up-front

B. Being more holistic - Expanding the scope of the transformation to include areas outside of Sourcing

C. Focusing on more than just savings D. Prioritizing initiatives more effectively E. More focus on the soft-side (people)

21

Final Thoughts - Planning for a Successful Procurement Transformation

• Procurement Transformation is not a “one size fits all” program; program design can depend on such factors as:

- Maturity of current sourcing/procurement organization - Skill level of current employees

- Company culture

- Buy-in from internal clients regarding progressive procurement practices - Current level of automation & technology sophistication

- Spending level and distribution across spend categories

• In order to design a Procurement Transformation program that will succeed, careful analysis of the current state of procurement should be completed before the detailed design is started

• Key stakeholders, inside and outside of Procurement should be included in the up-front assessment activities

• The planning phase is a fact-based data and information gathering process that should create valuable insight into the design phase

22 Thank you!

John Evans Conrad Snover

Managing Partner Partner

Denali Group Denali Group